(Recasts lead with auto rules; updates comments from Canadian foreign minister and person briefed on talks)
By David Lawder
WASHINGTON, April 25 (Reuters) - Canadian Foreign Minister Chrystia Freeland said on Wednesday that good progress has been made at the NAFTA trade talks on the key issue of auto rules, though the threat of proposed U.S. steel and aluminum tariffs coming into force next week clouded the mood.
Freeland, U.S. Trade Representative Robert Lighthizer and Mexican Economy Minister Ildefonso Guajardo met for a second straight day in a push to seal a quick deal on revamping the North American Free Trade Agreement.
"There is a very strong, very committed, good-faith effort for all three parties to work 24/7 on this and to try and reach an agreement," Freeland told reporters after talks with Lighthizer.
The bulk of talks focused on rules of origin governing what percentage of a car needs to be built in the NAFTA region in order to be sold tariff-free within North America, she said.
"I think we made some good progress. We're very much working on a set of proposals based on the creative ideas the U.S. came up with in March and I think there was good constructive progress," she added.
The ministers are expected to meet again on Thursday.
U.S. President Donald Trump's negotiators initially demanded that North American-built vehicles contain 85 percent content made in NAFTA countries by value, up from 62.5 percent now. But industry officials say that has been cut to 75 percent, with certain components coming from areas that pay higher wages.
The U.S. trade representative was still pushing its proposal for wage standards for certain auto parts, a person briefed on the talks told Reuters.
This plan would set the overall regional content requirement for autos at 75 percent, but would provide more credit toward reaching that goal for final assembly and manufacturing of certain high value parts like engines in higher wage areas paying around $15 an hour, the source said.
Some lower-value parts and materials would qualify for 70 percent and 65 percent regional thresholds, the source added.
The plan aims to preserve high-value production in the United States and Canada and put upward pressure on auto industry wages in Mexico.
TARIFF, SUNSET OBSTACLES
Freeland said Canada remained opposed to the U.S. idea of introducing a "sunset clause" that would allow one of the three NAFTA members to quit the pact after five years.
"Our view is that this is absolutely unnecessary," she said, noting that NAFTA already contained a withdrawal mechanism.